by Calculated Risk on 10/30/2014 02:54:00 PM

From HotelNewsNow.com: STR: US results for week ending 25 October

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 19-25 October 2014, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy rose 5.4 percent to 69.4 percent. Average daily rate increased 5.1 percent to finish the week at US$119.52. Revenue per available room for the week was up 10.8 percent to finish at US$82.89
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Business travel has probably peaked for the Fall season, and now hotels are heading into the slow period.

Click on graph for larger image.

The red line is for 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and is a little above the level for the same week in 2000 (the previous high). 

Right now it looks like 2014 will be the best year since 2000 for hotels.

And since it takes some time to plan and build hotels, I expect 2015 will be a record year for hotel occupancy.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 10/30/2014 11:36:00 AM

From housing economist Tom Lawler: M.D.C. Holdings: Net Orders Up, Orders per Community Down; Margins Fall on Higher Incentives

M.D.C. Holdings reported that net home orders in the quarter ended September 30, 2014 totaled 1,081, up 17.0% from the comparable quarter of 2013. Net orders per active community were down 2.3% from a year ago. Home deliveries totaled 1,093 last quarter, down 13.0% from the comparable quarter of 2013, at an average sales price of $370,600, up 7.4% from a year ago. The company’s order backlog at the end of September was 1,874, up 6.4% from last September, at an average order price of $422,700, up 10.0% from a year ago.

Here are some excerpts from the company’s press release.

‘Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "Against the backdrop of an uneven recovery for housing and overall economic conditions, we are pleased that we have consistently produced profitable results since the beginning of 2012. However, the volatility of the housing market recovery was evident in our third quarter results, as elevated land and construction costs, combined with our use of additional incentives to stimulate demand for new homes, have pressured our homebuilding gross margins."

‘Mr. Mizel continued, "While we believe that the housing recovery remains on solid footing, it is evident that certain obstacles, such as Qualified Mortgage Standards and reduced Federal Housing Authority loan limits, have taken their toll on housing demand, especially for the first time buyer segment. Additionally, on the production side of our business, we have seen a negative impact from tighter subcontractor availability and adverse weather conditions in certain markets, as well as an elongated mortgage approval process. We believe the impact of many of these factors will diminish over time, allowing us to return to more robust levels of demand as overall economic conditions continue to improve."’

M.D.C.’s results were below “consensus.”

Here are some summary results for large publicly-traded builders who have reported results for last quarter. For these six builders combined, net orders per active community last quarter were up 1.8% YOY. Excluding the impact of acquisitions of other builders, net orders last quarter were up about 8.3% YOY.

	Net Orders			Settlements			Average Closing Price
Qtr. Ended:	9/30/14	9/30/13	% Chg	9/30/14	9/30/13	% Chg	9/30/14	9/30/13	% Chg
Pulte Group	3,779	3,781	-0.1%	4,646	4,817	-3.5%	$334,000	310,000	7.7%
NVR	2,936	2,381	23.3%	3,236	3,342	-3.2%	$366,200	349,200	4.9%
The Ryland Group	1,707	1,592	7.2%	2,018	1,883	7.2%	$331,000	298,000	11.1%
Meritage Homes	1,500	1,300	15.4%	1,522	1,418	7.3%	$358,000	341,000	5.0%
MDC Holdings	1,081	924	17.0%	1,093	1,257	-13.0%	$370,600	345,000	7.4%
M/I Homes	892	869	2.6%	985	937	5.1%	$320,000	284,000	12.7%
Total	11,895	10,847	9.7%	13,500	13,654	-1.1%	$345,918	$322,597	7.2%

by Calculated Risk on 10/30/2014 10:30:00 AM

Earlier the DOL reported:

In the week ending October 25, the advance figure for seasonally adjusted initial claims was 287,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 283,000 to 284,000. The 4-week moving average was 281,000, a decrease of 250 from the previous week's revised average.

There were no special factors impacting this week's initial claims.

The previous week was revised up to 284,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 281,000.

This was close to the consensus forecast and suggests few layoffs.

by Calculated Risk on 10/30/2014 08:44:00 AM

From the BEA: Gross Domestic Product, Third Quarter 2014 (Advance Estimate)

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 3.5 percent in the third quarter of 2014, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.6 percent.
...
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, federal government spending, and state and local government spending that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The advance Q3 GDP report, with 3.5% annualized growth, was above expectations of a 2.8% increase.

Personal consumption expenditures (PCE) increased at a 1.8% annualized rate - a slow pace.

The first graph shows the contribution to percent change in GDP for residential investment (RI) and state and local governments since 2005.

This shows the huge slump in RI during the housing bust (blue), followed by the unprecedented period of state and local austerity (red) not seen since the Depression.

Click on graph for larger image.

State and local government spending was positive in Q3, and I expect state and local governments to continue to make a positive contribution to GDP in Q4 and in 2015.

RI (blue) added to GDP growth for a few years, before subtracting in Q4 2013 and Q1 2014.    RI bounced back in Q2 and Q3.

The second graph shows residential investment as a percent of GDP.

Residential Investment as a percent of GDP has bottomed, but it still below the levels of previous recessions - and I expect RI to continue to increase for the next few years.

I'll break down Residential Investment into components after the GDP details are released this coming week. Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories.

The third graph shows non-residential investment in structures, equipment and "intellectual property products".  Investment is trending up as a percent of GDP..

I'll add details for investment in offices, malls and hotels next week.

Overall this was an OK report, however PCE was weak (I expect stronger PCE going forward).

by Calculated Risk on 10/29/2014 08:34:00 PM

From the Atlanta Fed GDPNow:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2014 was 2.7 percent on October 28

From Chico Harlan at the WaPo: Tomorrow’s GDP numbers will give a better read on the U.S. economy

Many economists now say that the first quarter slide stemmed from a horrid East Coast winter that kept consumers indoors. They say that the second quarter was buoyed by a bounce-back effect, a release of all that pent-up demand for cars and homes. But this quarter? We’ll probably get something in between, confirmation of a recovery that’s yielding more jobs but little wage growth.

According to economists surveyed by Bloomberg, the GDP probably rose around 3 percent in the latest quarter. ... Three percent growth is hardly dazzling, but the number shines relative to other advanced economies.

And from Nick Timiraos at the WSJ: 5 Things To Watch in Thursday’s U.S. GDP Report

Thursday:
• At 8:30 AM ET, Gross Domestic Product, 3rd quarter 2014 (advance estimate). The consensus is that real GDP increased 2.8% annualized in Q3.

• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 280 thousand from 283 thousand.